Can policy stimulus reignite Chinese economic growth?
The Peninsula
DOHA: In recent decades, China has been a dominant engine of economic growth for the global economy. During the period 2008 2019, which includes the y...
DOHA: In recent decades, China has been a dominant engine of economic growth for the global economy. During the period 2008-2019, which includes the years between the Great Financial Crisis and the Covid-pandemic, the Chinese economy expanded at an average rate of 8%, accounting for approximately 1/3 of global growth. Since then, a combination of domestic factors has led to a marked deceleration in the pace of economic expansion, QNB said in its economic commentary.
Over the last years, pessimism regarding China’s growth performance has become widespread as economic indicators failed to meet expectations. This was substantiated by the China Economic Surprise Index, which provides a formal measure of how data releases stand relative to forecasts. Since June last year, the index plunged into the negative territory and displayed how negative news prevailed for the next 4 months before recovering since mid-Q4.
Furthermore, fears began to rise as attention shifted to the correction in property markets that seemed unable to find its trough, as well as the growing threat implied by mounting debts of local governments. In this context, there was growing impatience with the cautious and incremental approach by the government to implement policy stimulus to the economy. The Bloomberg consensus forecasts pointed to 4.7% growth of GDP for 2024. Although this number is remarkable by international standards, it was 3.3 percentage points (p.p.) below the 8% average for China between 2008 to 2019.
It is unlikely that growth rates could return to the rocketing pre-pandemic average, given the structural developments that conduct the economy to a natural long-term trend of growth moderation. However, several tailwinds allow for an improvement in its growth performance this year. In this article, we discuss three factors that will support growth in China in 2025.
